Frost Damages Coffee in Brazil

By Larry RohterBy Larry RohterAugust 25, 1978

A severe late winter frost has swept through Brazil's coffee-growing region, inflicting widespread damage on crops already weakened by a six-month drought earlier this year and triggering a spurt of insurance buying and speculation on international coffee markets.

In the first official evaluation of the damage, Camilo Calazans de Magalhaes, president of the Brazilian Coffee Institute, estimated that more than 30 percent of the crop Brazil expected to harvest next year has already been lost. According to Institute figures, Brazil will harvest just over 16 million sacks of coffee in 1979, a drop of 8 million sacks from the initial forecast. A sack of coffee weighs 132 pounds.

In the state of Parana, traditionally Brazil's largest producer of coffee, more than 200 million coffee trees have been reported affected by the five days of subfreezing temperatures. Many of the trees damaged had been planted to replace those destroyed in the disastrous Brazilian "black frost" of 1975, which sent coffee prices skyrocketing worldwide to record highs.

Coffee brokers here have cautioned that the effects of this year's frost, which has mainly attacked leaves and beans, appear to be less severe than those of the 1975 cold wave, which killed complete trees. Because not all frost symptoms show up immediately, however, a full evaluation of the damage is not expected until November.

Rumors of widespread crop losses, though, have led to erratic swings in coffee prices on the New York and London markets ever since news of the frost was announced last week. Brazil's initial response was to suspend all exports of green and instant coffee, but the institute withdrew this measure after market prices began to rise.

The frost in Brazil, the world's largest coffee exporter, has been greeted as a godsend by other coffee producers, who have seen market prices fall from a record high of $3.20 a pound last year to $1.40 a pound earlier this month. Mexico raised its minimum export price three times last week, and earlier this week Ecuador followed suit.

The Ecuadorian move came as Calazans was meeting in Bogota, Colombia, with representatives of seven other South and Central American coffee-producing nations. According to observers here, the institute intends to encourage the formation of a "common front" of coffee producers to keep prices at a "satisfactory" level.

"We are intending a slight increase in coffee prices," said Calazans on arrival in Bogota. "We have come together in search of cooperation with other producers and to avoid speculation that would be harmful to producers and consumers alike."

The three-day conference, which ends today, has already led to an agreement to set up international stocks of coffee to help control market prices. Brazilian sources said that the eight nations are also expected to announce both a "policy coordination agreement" and their joint support for price levels between dollars $1.80 and $2.20 a pound.

Exporters here expressed doubt, however, about Brazil's ability to benefit from any further rise in market prices to the extent that it did in 1975. As a result of the last frost, Brazilian coffee stocks have been at a record low and are now estimated at only 3 million sacks, as compared to more than 20 million sacks before 1975.